Pakistan is a high risk country because of its unstable security situation. However, due to the country’s vast population, there is significant potential for a sizeable market for consumer-orientated businesses as the purchasing power of individuals improves. Pakistan's close geopolitical ties with China should also ensure that it benefits from China's rise, through growing trade and investment.

We keep our clients informed of the latest market moves and political developments in Pakistan, as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 16 of Pakistan’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert research teams. We aim to keep you one step ahead, so you can operate with confidence in Pakistan.

Country Risk

Pakistan Country Risk

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  • The Pakistani military is finally making progress in tackling terrorism stemming from the northwestern tribal regions, with the civilian casualty rate falling to eight-year lows. However, the fall in terrorist activity could turn out to be a temporary lull as displaced militants regroup. Meanwhile, little progress has been made in targeting organisations operating in Pakistan that focus their attacks outside of the country.

  • Despite missing the government's target, Pakistan's real GDP growth came in at 4.2% in fiscal year 2014/2015, in line with our forecast, and marking an acceleration from FY2013/14. Improvements in the areas of fiscal reform, energy supply and security should support a slight pick-up in growth over the coming fiscal year, and we forecast real GDP growth to come in at 4.3% in FY2015/16.

  • We...

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Pakistan Operational Risk Coverage (9)

Pakistan Operational Risk

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BMI View: Pakistan is a regional and global underperformer on the BMI Operational Risk Index and investors are faced with a multitude of risks in the country. Transport and utilities infrastructure is ageing and there are frequent interruptions to both supply chains and power supplies. Pakistan is also at risk of a severe water shortage which could impact upon a range of industries. Although one of the most populous countries in the world, investors are presented with a restricted labour pool due to the very poor educational standards in the country and also face high labour taxes. Corruption is another significant risk, affecting all levels of the government and judicial system, and Pakistan is also at high risk of terrorist attacks. These factors result in an overall score of 34.3 out of 100 for Operational Risk, which puts...

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Pakistan Crime & Security

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BMI View: Investors are faced with substantial and severe risks in terms of the crime and security situation in Pakistan. Crime rates, which were already high, have been increasing in recent years and foreigners are frequently the targets of violent assaults and kidnappings. Pakistan is home to a large number of organised criminal groups and is also the base for domestic and international terrorist groups, which exacerbates already tense relations with neighbouring states. The police and military forces are considered highly corrupt, as well as poorly trained and underfunded. In light of these considerations, Pakistan receives a poor score of 8.4 out of 100 for Security Risks, placing the country 37th out of 38 Asia region states, ahead only of Afghanistan.

Pakistan scores particularly poorly for foreign worker vulnerability....

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Pakistan Labour Market

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BMI View: Investors in Pakistan are presented with considerable risks when it comes to the country's labour market. Years of neglect mean that the education system is failing, with low enrolment and attendance rates resulting in a lack of basic skills amongst the majority of the workforce. Despite the large working age population in the country, availability of labour is restricted due to a low level of female participation and poor general health reflected in the low life expectancy in Pakistan. These factors largely offset the potential benefits of a competitive minimum wage and flexible labour market conditions. Overall, therefore, Pakistan has a score of 40.9 out of 100 for Labour Market Risk, which places the country 34th out of 38 states in Asia, ahead only of Tuvalu, the Solomon Islands, Vanuatu and Afghanistan....

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Pakistan Logistics

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BMI View: Businesses operating in Pakistan will face considerable challenges when it comes to logistics. Although the country offers competitive electricity and fuel costs, interruptions to supply are frequent, which is a deterrent for heavy power user; and Pakistan is facing a severe water shortage. The costs of importing and exporting are relatively low; however this benefit is offset by the long lead times caused by the weak internal transport infrastructure in Pakistan. While Pakistan does offer enormous growth potential, at present it does not have the infrastructure to match and as a result the country has a score of 47.6 out of 100 on the BMI Logistics Risk Index. This puts Pakistan in 19th position out of 38...

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Pakistan Trade & Investment

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Trade and investment risks are very high in Pakistan owing to the country's high fiscal and trade barriers and the extent of red tape plaguing its bureaucracy. Compounded by the volatile domestic security situation, foreign investment outflow in recent years has slowed, a trend we expect to continue in the foreseeable future. That said, the country's developed banking system provides good access to international financial markets. For these reasons, the country has an overall score of 29.5 out of 100 for Trade and Investment, putting it in 24th position out of 30 countries in Asia.

Following a sharp rise in foreign direct investment (FDI) in Pakistan from the mid-1990s to the mid-2000s, since 2008 it has slowed significantly, and currently accounts for just 11.8% of Pakistan's total GDP. For the most part, inconsistent economic policies, high fiscal and trade barriers, high corporate tax rates and poor infrastructure are responsible for this...

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Pakistan Industry Coverage (16)

Agribusiness

Pakistan Agribusiness

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BMI View: As the country's wheat harvest begins, reports suggest Pakistan could enjoy a record-breaking crop. Officials have credited new strains of higher yielding wheat as being responsible for at least some of the improvements, but low cotton prices may have had more of an impact. Recovering prices for cotton will test the resilience of wheat output in the coming years of our forecast period, while also constraining cotton consumption growth. Rice farmers have suffered from plummeting prices, particularly for basmati. They are calling for similar export subsidies to those being granted to sugar and wheat consignments. Sugar mills are reported to be facing bankruptcy, which would...

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Autos

Pakistan Autos

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We have raised our 2015 forecast for auto sales in Pakistan to 16.7%, up from 4.8% previously. The significantly stronger outlook is underpinned by easing monetary conditions, which will help to lower credit costs for potential car buyers, while the government's taxi scheme will also continue to spur demand momentum over the coming quarters.

According to the Pakistan Automotive Manufacturers Association (PAMA), for the first nine months of FY2014/15 (July - June), passenger car sales expanded by 21.9% year-on-year (y-o-y), while commercial vehicle (CV) sales grew by 35.0% y-o-y, bringing overall auto sales growth to 23.9% y-o-y. Auto sales over the first three quarters of FY2014/15 amounted to 126,366 units.

Given that our Country Risk team believes there is still room for further easing over the coming months, lower credit costs will continue to fuel strong demand for the sector. For the CV segment, we foresee...

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Commercial Banking

Pakistan Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Pakistan Consumer Electronics

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BMI View: Pakistan continues to present major challenges to vendors and underperform its potential due to a number of economic, social and political risks. However, the large population and rising incomes mean there are still opportunities for vendors. Although political and security concerns remain, the economic environment is supportive of expansion due to rising incomes, consumption growth and private sector credit growth recovering from its recent trough. The opportunity provided by the large population and economic environment has been sufficient to attract investment from...

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Defence & Security

Pakistan Defence & Security

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BMI View: We expect an escalation in domestic security threats though 2015 in response to the NATO withdrawal from Afghanistan, the ongoing military offensive in the Federally Administered Tribal Area (FATA), and rising tensions with Indian forces along the Jammu Kashmir border. The Pakistan Government has increased military spending, and is investing in indigenous defence companies. They in turn are looking to increase capacity through international partnership, creating opportunities for foreign players. 

The security situation in Pakistan has steadily deteriorated through 2014. Last year witnessed regular terrorist attacks against military and civilian assets, including Karachi International Airport. This illustrates that domestic and international terror cells are well resourced and well trained, making them a credible threat to domestic and international organisations. Moreover, the NATO...

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Food & Drink

Pakistan Food & Drink

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BMI View: Increased co-operation between Islamabad and Beijing, particularly in the area of energy infrastructure, should provide strong support to investment growth in Pakistan over the coming years. Our longer-term domestic demand outlook for Pakistan is looking relatively bright, as declining costs of credit and disinflationary pressure are likely to prove supportive of domestic demand. We have upgraded our real GDP growth forecast for fiscal year 2014/15 (July-June) to 4.2% from 4.0% previously. Per capita food consumption is forecast to experience strong growth, however this will be from a low base and consumption is likely to remain significantly lower than other key emerging markets.

Headline Industry Forecasts (local currency):

  • 2015 per...

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Freight Transport

Pakistan Freight Transport

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The freight mix in Pakistan is set to perform moderately in both the short and medium term, with growth constricted somewhat by the parlous state of many integral economies at present. Also, domestic strife, such as the road blockade in Punjab in August 2014, has had a detrimental effect on freight output and such scenarios could flare up again into 2015.

Export cargo worth USD600mn came to a standstill in August 2014 due to a road blockade in the province of Punjab, according to exporters and shipping line sources and reported by Business Recorder. The tussle between the Pakistani government and opposition political parties - Pakistan Tehreek-e-Insaf and Pakistan Awami Tehrik - has resulted in a virtual collapse to businesses, trade, social and exports activities in the province. This could have a significant detrimental impact on the Pakistan freight industry should further blockades take place going forward.

The...

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Infrastructure

Pakistan Infrastructure

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BMI View:  Our outlook for Pakistan's construction sector remains largely subdued for 2015 and beyond. Domestic political uncertainty is undermining confidence in the market, and ongoing security risks continue to deter foreign investors. High levels of government debt and rising inflation are restricting public spending, and while many infrastructure projects are planned or underway, these continue to suffer from escalating costs and delays.

Pakistan's infrastructure network, starting as it does from a low base, does offer enormous long term potential. The country benefits from a strong regional location, good relations with powerhouse China and a large potential labour pool. If it is able to secure political stability and address corruption at high levels in order to create a more attractive investment environment we may see further growth in Pakistan...

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Insurance

Pakistan Insurance

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BMI View: The insurance market in Pakistan is challenged by a multitude of factors - growing security concerns, widespread poverty and frequently constrained access to capital for companies operating within the market. A recent surge in the economy as a result of lower commodity prices will benefit the wider economy and boost purchasing power as inflationary pressures subside. We also remain optimistic surrounding the micro-insurance sub sector which has created opportunities for lower-income households to access the benefits of insurance at more affordable levels.

We maintain our outlook that the embryonic Takaful sub sector benefiting from new regulations will assist in increasing insurance penetration in the country. Since the passing of new regulations in May 2014 more conventional firms are able to offer Sharia-compliant insurance products to...

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Medical Devices

Pakistan Medical Devices

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BMI Industry View: The Pakistan medical device market is small for a country its size. Domestic production is limited primarily to steel surgical instruments and the majority of the market is supplied by imports. In 2013, BMI estimates that the medical device market was worth USD259.7mn, or USD1.4 per capita. The medical device market is expected to grow at a reasonable rate, with a CAGR of 6.3% forecast for the 2013-2018 period.

Headline Industry Forecasts

...

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Oil & Gas

Pakistan Oil & Gas

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BMI View: While a string of recent exploration successes boosted Pakistan's oil and gas reserves in 2014, we forecast the country's reserves to continue declining over the next decade due to excessive use and lack of new significant discoveries. Nonetheless, recent discoveries and greater private sector involvement in the upstream sector pose an upside risk to our forecast and could stimulate much needed investment thus helping the country temper or reverse the negative trend.

Headline Forecasts (Pakistan 2013-2019)
2013 2014e 2015f ...

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Pharmaceuticals & Healthcare

Pakistan Pharmaceuticals & Healthcare

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BMI View: Medicine sales in Pakistan will continue to grow significantly from a low base. Underpinning this trajectory includes a reform in the country's pricing environment that will see scope for an increase in pharmaceutical prices. This will in turn encourage more investment from drugmakers to capture the commercial opportunities stemming from the country's epidemiological profile. Downside risks remain due to the lack of policy continuity and potential cost containment measures

Headline Expenditure Projections

  • Pharmaceuticals: PKR231.2bn (USD2.29bn) in 2014 to PRK254.0bn (USD2.47bn) 2015; +9.8%in local currency terms and +7.7% in US dollar terms.

  • Healthcare: PKR684.5bn (USD6.78bn) in 2014 to...

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Power

Pakistan Power

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Electricity Generation And Power Generating Capacity

Total Electricity Generation Data And Forecasts (Pakistan 2013-2018)
2013e 2014e 2015f 2016f 2017f 2018f
e/f = BMI estimate/forecast. Source: National Sources, BMI...

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Real Estate

Pakistan Real Estate

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BMI View: Pakistan's commercial real estate sector is underdeveloped, with long-term security problems and unstable politics having served to deter investment into the sector. Although we see this situation continuing, at least in the short term, in the long term there are significant opportunities as prices are low, meaning potential yields are high, and there is considerable room to expand and modernise Pakistan's stock of commercial real estate.

Improved regulations surrounding the creation of real estate investment trusts (REITs) could pave the way for increased investment via this format, and lead to more Pakistani investment being directed into the home market rather than overseas.

We forecast Pakistan's real GDP growth rate will be around 4.1% a year over our forecast period to 2018. The economy is held back by concerns over the security situation and political...

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Shipping

Pakistan Shipping

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Good Port Growth Expected

We continue to forecast moderate-to-strong throughput growth at Pakistan's main ports in the fiscal year ending June 2015, with volumes growing by 3-8%. Growth will be marginally down on the previous year, reflecting a slowdown in foreign trade expansion.

In headline terms, Pakistan's economy currently has two factors working in its favour and one against. Positive momentum is provided first, by lower international oil prices, and second by the process of economic reforms. The negative factor remains the poor security and high political risk environment, which continues to cause concern among investors. Despite a degree of political turmoil the economy has remained firm. Prime Minister Nawaz Sharif's popularity remains strong. This suggests the reform process will continue, supporting accelerating real GDP growth. Indeed, the Pakistan Muslim...

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Telecommunications

Pakistan Telecommunications

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BMI View: Mobile data usage increased appreciably in the 2013/14 financial year and grew at an even faster rate in the period to March 2015. The rapid and widespread deployment of 3G/4G networks over the last 12 months lay the foundations for the emergence of a more content-focused industry, although continued reliance on low-cost prepaid services will continue to weigh on operators' bottom lines. The mobile market remains crowded while the wireline market is dominated by the incumbent, creating an imbalance of power. There are few opportunities for an infrastructure-focused new entrant, although there is a case to be made for the establishment of an advanced national broadband network under the aegis of a forthcoming new telecoms policy.

Key Data

  • There were 12.072mn 3G/4G mobile...

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